Lenders shouldn't waiver on monitoring early payment defaults

​National Mortgage News | July 29, 2020 | by Phil McCall

July 29, 2020   |   Article

The Federal Housing Administration's temporary waiver of its required monthly early payment default quality control reviews was a welcome concession to the unique circumstances lenders and borrowers are facing during the COVID-19 pandemic.

However, other factors indicate that EPDs still pose risk for lenders in the months to come and should, therefore, be closely monitored.

The primary reason for the FHA's waiver is clear: the agency feels current QC review efforts will be expended on something blatantly obvious, as the vast majority (though not all) of EPDs during this period are related to the pandemic. In issuing its temporary waiver, the FHA noted the financial issues borrowers are experiencing as a result of the coronavirus, rather than any failure by lenders to comply with its single-family origination and underwriting requirements, as a potential cause for the recent spike in EPDs.

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